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The Government has part-nationalised Royal Bank of Scotland, Lloyds TSB and HBOS in an attempt to save the UK banking industry.

The £37bn bailout will see the Treasury buy 44% of the new Lloyds HBOS superbank and 60% of RBS.

The Government will buy £20bn of RBS shares and then a further £17bn is being pumped into HBOS and Lloyds TSB upon completion of their renegotiated merger.

Barclays says it will raise £6bn through private capital raising. Nationwide and Santander, which owns Abbey and Alliance & Leicester say they will also raise more capital. HSBC will inject £750m into it’s UK business.

The bailout has raised the shares of the banks, and bankers hope it will add much-needed confidence to the struggling markets.

The Government will have specially appointed directors on the boards of the banks to make sure they adhere to the new conditions of the bailout.

Alistair Darling, the chancellor says he expects the banks to make no bonus payments to board members this year and to ensure that bonus structures reward long-term value creation in the future.

RBS chief executive Sir Fred Goodwin and HBOS chief executive Andy Hornby have already resigned, without any severance pay.

The Prime Minister Gordon Brown has promised the Government will be the "rock of stability" for British families and businesses. It has also provided another £50bn injection to help revive the banking sector.

Darling says: "It is necessary because we are going through quite extraordinary circumstances the world over and I'm determined to do everything we can to stabilise our banking system and make it stronger."

The British Bankers' Association says: “It will take a little time for these measures to work through. We are pleased that other governments in Europe and elsewhere will now follow the lead taken by the UK. We also hope taxpayers need to hold a stake in our banks for as short a time as possible.”
Kevin Mountford, head of banking at moneysupermarket.com, says:
"This bail-out will no doubt change the shape of banking for years to come, but what will happen to consumers?

"Once we see a level of confidence and security returning to the market, there will start to be more interbank lending, which could trigger a reduction in savings rates.

"However the desire for retail inflow will remain strong so it is bank and building society mergers and acquisitions that presents a greater risk to interest rates as it is likely to reduce competition."

The Intermediate Mortgage Lenders Association executive director Peter Williams says the rescue package is small in terms of helping homeowners, but is “hugely significant” to the banking sector.

He says: “The pace with which that moved from being an idea to being a reality suggests the pressure that all the major banks are under. £50bn is the kind of sum that people are looking for and this just shows the scale of the issue.”

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